Report found state has cut local government funding by nearly 50 percent since 2010

With the support of local officials from around the state, Cincinnati Councilman P.G. Sittenfeld is launching a website called ProtectMyOhio.com to organize efforts to restore local government funding cut during Gov. John Kasich’s time in office.

“What we’re really trying to do today is speak up and
sound the alarm about the governor’s ongoing raid on the Local
Government Fund,” Sittenfeld said. “Over the last four years, the
governor has taken away $3 billion in local government funding. This
year alone, municipalities across Ohio are going to receive nearly $1
billion less than they previously would have.”

He added, “This is the exact same money that cities,
villages and townships used to keep cops in the street, staff our fire
departments, fix the potholes and some of the other basic services that
citizens rightly expect and the local governments are the ones
responsible for delivering.”

In the past, the Kasich administration has argued the cuts
were necessary. When previously asked about cuts to education and other
state funding, Rob Nichols, Kasich’s spokesperson, told CityBeat, “The reality is we walked into an $8 billion budget deficit. … We had to fix that.”

But the 2014-2015 budget is not under the fiscal pressures Kasich experienced when he took office, and the governor is pursuing $1.4 billion in tax cuts over the next three years,
which he argues will help spur small businesses around the
state. During the phone conference, local officials said the revenue going to tax cuts
would be better used to return funds to local governments.

Sittenfeld says the cuts have left Cincinnati with $12
million less per year. “That is the difference between us having our
first police recruit class in nearly six years versus not having it,” he
said. “It’s the difference between enduring dangerous fire engine
brownouts versus not having to do so.”

Klein, who represented Columbus in the call,
said the cuts have amounted to nearly $30 million for his city, which he
said is enough money to help renovate nearly all the city’s recreation
centers, parks and pools.

“No one is spared,” Klein said. “Everyone is getting cut
across the state, and every neighborhood — no matter if you’re in a
small village or in a large city like Columbus, Cleveland, Toledo or
Dayton — (is) at some level feeling the effects of the cuts, whether
it’s actual cuts in services or what could be investments in
neighborhoods.”

Klein said the cuts, which have been carried out by a
Republican governor and Republican-controlled legislature, contradict
values espoused by national Republicans. At the federal level,
Republicans typically argue that states should be given more say in
running programs like Medicaid, but Ohio Republicans don’t seem to share
an interest in passing money down to more local governments, according
to Klein.

Some state officials have previously argued that it’s not
the state’s responsibility to take care of local governments, but
Sittenfeld says it’s unfair to not give money back to the cities:
“Cincinnati is a major economic engine for the entire state. We’re
sending a lot of money to Columbus, so I think it’s fair to say we would
like some of that money back. John Kasich doesn’t have to fill the
potholes, and John Kasich doesn’t have to put a cop on the street.”

Whaley, who represented Dayton in the call, said, “There’s
a county perspective on this as well. The counties would certainly say
that the unfunded mandates that the state legislature brings down daily
are covered by those local government funds. While (state officials)
keep on making rules for the counties to administer services and make
those efforts, it’s pretty disingenuous to say that (county officials)
don’t get a share of the income.”

A Policy Matters Ohio report found the state has cut $1.4 billion from local government funding
— nearly half of total funding — during Kasich’s time as governor. The report pinned much of that drop on the estate tax,
which was phased out at the beginning of 2013 and would have provided
$625.3 million to local governments in the 2014-2015 budget. The estate tax was
repealed in 2011 by the Republican-controlled Ohio legislature and
Kasich.

Cincinnati had structural deficit problems before Kasich
took office, but local officials argue the state’s cut have made matters
worse. When presenting his 2013 budget proposal, City Manager Milton
Dohoney Jr. said the state funding reductions cost Cincinnati $22.2
million in revenues for the year.

Kasich’s office did not return CityBeat’s phone calls for this story.

Kasich’s latest budget proposal has also been criticized by Republicans and Democrats
for tax cuts and education funding plans that benefit the wealthy and
expanding Medicaid (“Smoke and Mirrors,” issue of Feb. 20).

City Council committee passes measure allowing “double dipping”

City Council’s Budget and Finance Committee moved forward
with two controversial measures in two 5-4 votes today that will allow the
city to rehire retirees while still paying their pensions and create an
executive project director position for the streetcar project.

One of the measures repeals the city’s ban on “double dipping,”
which means rehired retirees will be able to
simultaneously cash in a salary and pension payments. The measures will allow the city to hire John Deatrick, the
current project manager for The Banks, to head the streetcar project.
The city could not previously hire Deatrick because he formally retired
from the city and is currently receiving pension payments.

The city says Deatrick has the experience and expertise
necessary to help bring the streetcar project’s costs in line, but
critics say the city should not be hiring someone for the streetcar
project when the city is considering laying off 344 employees, including
189 cops and 80 firefighters, to balance the budget.

Deatrick says the layoffs are unfortunate, but he
emphasizes that they are occurring through the general fund. If he was
hired, Deatrick’s salary would be paid through the capital budget, a
completely separate fund that the city uses for major development
projects. Because of legal and traditional constraints, capital budget funds generally can’t be used to balance the general fund.

Deatrick’s point is similar to an argument often touted by City Manager Milton
Dohoney Jr., who says the city needs to economically grow out of structural budget
deficits. Dohoney and other city officials say the true cause of Cincinnati’s
structural budget imbalance has been the city’s dwindling population in
the past decade, and bringing people back to Cincinnati through economic
development projects, including the streetcar, is a better approach than austerity that would cause more
layoffs and economic pain.

Others, particularly Democratic mayoral candidate John
Cranley, aren’t convinced. In a press statement that used vocabulary that often comes from streetcar opponent COAST (Coalition Opposed to
Additional Spending and Taxes), Cranley said, “Since day one the
streetcar has been a poorly conceived, poorly managed boondoggle that is
now costing the city even more money. The fact that this being done
while police officers and firefighters are facing layoffs is a slap in
the face of those who risk so much to make sure that our city is safe.”

But the city says Deatrick’s involvement could help bring
the streetcar project’s costs down, and Deatrick seems to agree.

“That’s
been my whole ‘shtick,’ ” Deatrick says, before citing numerous aspects
of the streetcar project he would be interested in looking at to
bring costs in line.

Opponents have pointed to the streetcar’s multiple problems, including unexpected costs and delays, as proof the project has been doomed from the start. But Deatrick says it’s normal for big projects to deal with hurdles, and he cautions he would expect to deal with more rising problems if he takes the job.

“Any time you try to build something — even out in the
middle of a corn field — you’re going to have unexpected, unanticipated
issues,” he says. “These things happen, and that’s what project
management is all about.”

Deatrick says he has long supported the streetcar, and he
plans to expand the project up to the University of Cincinnati and the
rest of the uptown area if he’s put in charge.

While Deatrick has discussed heading the streetcar project with
city officials, no formal offers have been made yet. Still, City Council members
and Dohoney repeatedly named Deatrick as a potential candidate in the
special session of City Council today.

Some council members said they were concerned the double-dipping measure will be
used for more similar hires in the future, which could raise
hiring costs as the city pays for multiple employees’ salaries and
pensions at the same time.

Deatrick’s resume shows experience going back decades.
Since June 2008, Deatrick has headed The Banks project, which recently
won the American Planning Association’s 2013 National Planning
Excellence Award for Implementation (“Bank On It,” issue of Jan. 16).

Before that, he worked as deputy director and chief
engineer at the District of Columbia Department of Transportation from
May 2002 to August 2007, where he says he helped manage parts of the
D.C. streetcar, among other projects.

Prior to his work at D.C., Deatrick started his career as an urban development
technician at Cincinnati’s Department of Transportation and Engineering on September 1973. He helped with many projects around the city before eventually rising to the director position in
November 1999, where he remained until May 2002.

The streetcar is one of the few issues dividing Democratic
mayoral candidates Cranley and Qualls, making the 2013 mayoral race
another important election for the future of the project (“Back on the Ballot,” issue of Jan. 23).

Still no budget deficit-solving consensus in sight

If Cincinnati does not lease its parking assets to the
Port of Greater Cincinnati Development Authority, it will have to pay
off a $35 million deficit in the fiscal year 2014 budget through other means, but
those means were disputed at a special session of City Council today.

City Manager Milton Dohoney Jr. and other
city
administration officials say the city will have to carry out Plan B,
which would lay off 344 city employees, including 189 cops and 80
firefighters. But
council members Chris Seelbach, P.G. Sittenfeld, Charlie Winburn and
Chris Smitherman claim there are other ways — casino revenue and cuts
elsewhere — to balance the budget.

The meeting got testy after a few council members called
the city administration “disingenuous” for framing Plan B and the
parking plan as the only two budget options, prompting Mayor Mark Mallory to
slam council members for attempting to pin the city’s budget woes on the
city administration.

“I don’t think anyone in the administration wants to see
their colleagues laid off,” Mallory said. “The administration makes a
recommendation to this mayor and to this council. The final decision
makers are the elected leaders.”

He added, “What’s disingenuous is to create a crisis and then
criticize the administration for its response to the crisis when those
responsible for dealing with the crisis are the elected leaders. It
would be like an arsonist setting a building on fire and then
complaining about how long it took the fire department to get there and
what equipment they used to put out the fire.”

Lea Eriksen, the city’s budget director, said the ideas
she heard at the special session today would not be enough
to close the budget gap.

Throughout the discussion, the city administration
repeatedly dismissed ideas presented by council members as not enough to overcome the city’s $35 million deficit and avoid layoffs. By the city
administration’s admission, even Plan B would only close about $26
million of the projected deficit.

How that budget gap is closed may come with additional
expenses. Eriksen said the budget gap may reach $45 million if the city carries
out Plan B because the city would also be forced to pay for accrued
leave and unemployment insurance.

Still, Assistant City Manager David Holmes
admitted the
city could balance the deficit without Plan B or the parking plan, but
the numbers must “add up” and would require direction from City Council.

When the discussion came to casino revenues, Holmes said
the city administration feels “uncomfortable” projecting casino revenue
because the state’s projections have trended downward in the past few
years. In 2009, the state government estimated Ohio’s casinos would take
in $1.9 billion a year, but that projection was changed to $957.7
million a year in February.

Eriksen said the city estimates between $9
million and $11
million in casino funds will be available to the city. She said even if
Cincinnati’s Horseshoe Casino hits its $100 million goal, the city
will not be able to get the $21 million previously touted by Horseshoe
Casino General Manager Kevin Kline because the money is pooled with
money from other casinos around the state, which has fallen far below
projections, before it’s distributed to cities
and counties.

When asked about shifting parking
meter revenue to the general fund to help balance the budget, Eriksen
said doing so would ultimately be a “wash” because of expenses currently
attached to parking meter revenue.

Seelbach suggested making more cuts through the
priority-driven budgeting process. Eriksen explained Plan B does cut
programs that were poorly ranked by the process — the mounted patrol
unit, arts funding and recreation centers were a few examples she cited. But
only relying on programs ranked poorly by the priority-driven budgeting process would “decimate” departments and
programs that the city deems essential, she said.

In the original 2013 budget proposal put forward by the city
manager, mounted patrol was cut, but Seelbach lobbied for the
program’s restoration.

Multiple council members brought up traveling and training
costs as potential areas to cut, but Eriksen said the city
administration had not considered further cuts in those areas because
the leftover expenses are currently used to get certifications that city
employees “need to do their jobs.”

Councilman Charlie Winburn, the lone Republican on City Council, asked the city administration
if they tried to balance the budget without layoffs. Eriksen replied,
“Yeah, that was called the parking plan.” She added without the parking
plan, it would be “mathematically impossible” to balance the budget
without layoffs.

When Winburn suggested city employees should take salary
cuts, Eriksen said such cuts would require extensive negotiations with
unions because about 90 percent of the city’s employees are unionized.

In November, Winburn was one of the prominent supporters of giving the city manager a raise and bonus.

Vice Mayor Roxanne Qualls, a Democrat running for mayor,
said she would be open to using any revenues possible for reducing the
budget gap, but she said City Council must acknowledge the harsh budget
realities facing the city — further re-emphasizing points she made in a blog post Sunday.

John Cranley, another Democrat running for mayor, has said
in the past that the threat of layoffs is “the boy crying wolf.”
Cranley released his own budget plan
on March 28 that he says would avoid layoffs and balance the budget
without the parking plan, but some critics say the budget’s revenue
estimates are unrealistic.

Eriksen said Cincinnati has run structurally imbalanced budgets since 2001, but city officials say deficits have been made much worse by state cuts in local government funding carried out by Gov. John Kasich and the Republican legislature since 2010 (“Enemy of the State,” issue of March 20).

City Council approved the parking plan in a 5-4 vote on
March 6 that would lease the city’s parking assets to the Port Authority
to raise funds that would help balance the deficit for the next two
fiscal years and pay for new development projects, including the
construction of a downtown grocery store (“Parking Stimulus,” issue of Feb. 27).

Opponents of the parking plan, who say they fear it will
lead to rate hikes, filed their petitions for a referendum effort today.
It is so far unclear whether they have the 8,522 verified signatures
required to put the issue on the November ballot.

City manager says he's already made preparations for layoff notices

Speaking at a press conference today, city officials did
not mask their contempt for the ruling that put the parking plan on hold
earlier in the day, saying it will force the city to make cuts and layoffs to
balance the 2014 budget and potentially eliminate the passage of
expedited legislation.

The press conference was in response to a ruling
from Hamilton County Judge Robert Winkler, which opened the parking plan
to referendum and ordered a permanent injunction on the plan pending any referendum effort. City Solicitor John Curp said the city is appealing
the ruling.

Mayor Mark Mallory and City Manager Milton Dohoney Jr.
explained the city will now have to close a $25.8 million shortfall in
the budget for fiscal year 2014, which begins July 1.

Dohoney said he has already ordered city departments to begin
preparations for Plan B, which will lay off 344 employees, including 80
firefighter and 189 police positions, to balance projected deficits.

“Part of the irony is we're swearing in a recruit class tomorrow,” he said, then shook his head. “Too bad.”

In addition to meeting the July 1 budget deadline, the city has to expedite some layoff notices to meet union contracts, which typically require a notice 30 days in advance.

Curp said the ruling also poses significant legal challenges that will hinder the city’s ability to expedite legislation with emergency clauses. Emergency clauses are often used by City Council to remove
a 30-day waiting period on passed laws, and the city argues they also
remove the ability to referendum.

The layoffs could be retroactively pulled back if the city
wins in appeals courts or if the referendum effort fails to gather
enough petitions.

“Don't sign the petition,” Mallory said. “If you sign a petition, you're laying off a cop or firefighter.”

Dohoney said the delays make the city look
sluggish — an image that he says the city has been trying to overcome.
“One of the criticisms I’ve gotten is that this city takes too long to
get deals done,” he said. “This complicates that.”

City Council approved the parking plan to lease the city’s
parking assets to the Port of Greater Cincinnati Development Authority
to help balance the budget for the next two fiscal years and fund
development projects around the city, including a downtown grocery store
(“Parking Stimulus,” issue of Feb. 27).

Opponents of the plan argued that there were alternatives
that did not involve laying off cops or firefighters. Councilman Chris
Seelbach proposed Plan S, which would redirect $7.5 million in casino
revenue to help balance the deficit, cut $5 million based on the results
of the city's priority-driven budgeting process and put two charter
amendments on the ballot that, if approved, would include up to a
$10-per-month trash fee and increase the city's admissions tax by 2
percent.

At the press conference, Mallory called the alternatives
“unworkable.” He said Plan S in particular does not work because it
relies on a ballot initiative that would have to be voted on in
November. “We don’t have until November,” he said.

Opponents say they’re concerned the parking plan will
cede too much control over the city’s parking meters, which they say
will lead to a spike in parking rates.

The city says rate increases are initially capped at 3
percent or inflation — whichever is higher — but the rates can change
with a unanimous vote from a special committee, approval from the city
manager and a final nod from the Port Authority. The special committee
would be made up of four people appointed by the Port Authority and one
appointed by the city manager.

In the legal proceedings, the two sides are arguing whether emergency
clauses eliminate the ability to hold a referendum on legislation. Opponents of the
parking plan, headed by the Coalition Opposed to Additional Spending and
Taxes (COAST), say the city charter is ambiguous with its definition of
emergency clauses, and legal precedent demands courts side with voters’
right to referendum when there’s ambiguity.

Supporters of the parking plan cite state law, which says emergency legislation is not subject to referendum. Terry
Nestor, who represented the city in the court hearings, said legal precedent requires the city
to defer to state law as long as state law is not contradicted in the
city charter.

Winkler sided with opponents of the parking plan in his
decision. He wrote in his ruling, “If the people of Cincinnati had
intended to exempt emergency legislation from their referendum powers,
they could have done so when adopting Article II, Section 3 of the City
Charter.”

Mallory says the city is not disputing voters’ right to
referendum in a general sense; instead, he says the city needs to expedite
the budget process to balance the budget before fiscal year 2014.

City officials say the parking plan is necessary largely because of Gov. John Kasich’s local government funding cuts, which Dohoney previously said cost Cincinnati $22.2 million in annual revenues (“Enemy of the State,” issue of March 20). Opponents argue Cincinnati had structurally imbalanced budgets years before Kasich took office, but the city says Kasich’s policies have made the situation much worse.

The parking plan is one of the few issues dividing Democratic
mayoral candidates John Cranley and Vice Mayor Roxanne Qualls. Cranley opposes the plan, while Qualls supports it.

Council meeting covers streetcar's costs, benefits

Convening in packed City
Council chambers today, Cincinnati officials discussed the costs and benefits of the streetcar project in light of a $17.4 million budget gap revealed by the city administration on April 16. City Manager Milton Dohoney Jr. said the project could and should be saved, but
a minority of public speakers and some City Council members did not seem
convinced.

To balance the budget
gap, Dohoney said the city would have to pull funds
from multiple sources. He said he will offer specifics in writing
tomorrow, which invoked verbal disappointment from officials who were expecting details at the meeting.

“I'm disappointed in
this presentation,” said Councilman Chris Smitherman.
“We're here today to hear how we're going to pay for it.”

The meeting, which was
called by Democratic Vice Mayor Roxanne Qualls shortly
after the budget shortfall was announced, covered a presentation from Dohoney, comments from public speakers and City Council
questions to Dohoney. Despite expectations prior to the meeting, no specifics were given for closing the budget gap even after extensive questioning.

Dohoney did reveal the price tag for halting the streetcar project: $72 million. According to Dohoney, the project has
already cost the city $19.7 million, and the city would have to spend another $14.2
million in close-out costs. Another $38.1 million in federal grants would have
to be returned to the federal government.

Dohoney added that terminating the project would also
reduce faith in Cincinnati’s competitiveness and ability to take on big development
projects.

The budget gap was
originally $22.7 million, but the city administration identified $5.3
million in potential cuts. Dohoney said further cuts would “alter the
scope” of the
project and push it into a “danger zone.”

The budget gap is a
result of construction bids coming in $26 million to $43 million over budget.
The lowest bid from Messer Construction, which came in $26 million over budget,
has already expired, but Dohoney said the company is
still willing to work on the streetcar project.

The city could rework
the request for proposal for construction bids, but Dohoney
said city officials and third-party experts agreed it’s unlikely that would
effectively lower costs.

Throughout the meeting,
streetcar opponents argued that the cost of the project is too high and the
budget shortfall is proof the program is unsustainable.

Most of Dohoney’s presentation focused on the streetcar’s purpose. He said the streetcar would help drive
economic and population growth, which would then bring in more tax revenue to
help balance the city’s operating budget. That would represent a turnaround for Cincinnati, which has been steadily losing population since the 1950s during a period that has
coincided with disinvestment, urban flight and the dissolution of
the city’s old streetcar system.

Throughout his presentation, Dohoney cited multiple examples and studies that found
streetcars can help grow local economies. He
said the city has not pursued the streetcar because “it’s a cool thing to do,”
but because it follows the expert advice given to city officials about what’s
necessary to compete with other cities.

Dohoney’s argument was previously supported by HDR, which
the city hired to do an economic impact study in 2007. HDR found major benefits
to connecting Over-the-Rhine and the Central Business District, including
travel cost savings, increased mobility for low-income individuals and economic
development that would spur rising property values. The HDR study was entirely
supported and echoed by a follow-up assessment from the University of
Cincinnati.

Some critics have argued that the study is outdated because it was conducted before Over-the-Rhine’s recent revitalization, but Dohoney said there are still several hundred vacant
buildings in the area, particularly north of Liberty Street.

The project has faced
continued opposition from Democratic mayoral candidate John Cranley,
Republicans and the conservative Coalition Opposed to Additional Spending and
Taxes (COAST). They say the project is too expensive and they’re skeptical of the
economic growth being promised by city officials.

Opponents of the
streetcar have so far put the project on the ballot twice, but Cincinnati voters rejected the referendum efforts. Still, the streetcar may be on the ballot
again this year through the 2013 mayoral race between Democrats Cranley and Qualls (“Back
on the Ballot,”
issue of Jan. 23). Cranley opposes the streetcar, while Qualls supports it.

The streetcar project
was originally supposed to receive $52 million in federal funds through the state
government, but Republican Gov. John Kasich pulled the funds after he unseated
Democratic Gov. Ted Strickland.

Beyond the financial cost, Dohoney pointed out Kasich’s decision raised concerns about the project’s feasibility among previous supporters, leading to more hurdles and delays. He said Duke Energy in particular began stalling efforts to move utility lines to accommodate for streetcar tracks because the company grew weary of the project’s prospects.

Duke’s reluctance led to
a conflict with the city over who has to pay to move utility lines — a conflict
Duke and the city agreed to resolve in court. While the court battles play out,
the city set aside $15 million from the Blue Ash Airport deal to move utility
lines, but city officials say they will get that money back if the courts side
with the city.

The city originally expected
$31 million in private funding for the streetcar project, but those
expectations were dampened as a result of the Great Recession, which forced local companies to scale back private donations.

John Deatrick, the current project manager for The Banks, previously told CityBeat that it’s normal for large projects to deal with multiple hurdles. Deatrick, who the city wants to hire to manage the streetcar project, said, “Any time you try to build something — even out in the middle of a corn field — you’re going to have unexpected, unanticipated issues. ... These things happen, and that’s what project management is all about.”

Dohoney said the current phase of the streetcar project
is only a starter line between Over-the-Rhine and Cincinnati’s business
district, but city officials are already planning for a second line that would run up to the University of Cincinnati and
hospitals in uptown. If Dohoney’s vision for the project were completed, streetcars would run on multiple lines all around the city, ranging from the Cincinnati Zoo to The Banks.

The streetcar budget
debate comes amid another debate regarding a $35 million deficit in the city’s
operating budget. Some streetcar opponents have tried to link the two issues,
but the streetcar is funded through the capital budget, which cannot be used to
balance the operating budget because of legal and traditional constraints.

Campaign paid nearly $70,000 to gather petitions in city

The tea party-backed amendment that would semi-privatize
Cincinnati’s ailing pension system gathered enough signatures earn a place on the November ballot.

Of 14,215 signatures scrutinized so far, 8,653 were valid, according to Sally Krisel, deputy director of the Hamilton County Board of Elections. That clears the requirement of 7,443 signatures, but the numbers will grow as the board continues counting petitions.

The success follows a well-funded effort from Cincinnati
for Pension Reform, which paid California-based Arno Petition Consultants
nearly $70,000 to collect enough signatures, according to petition
documents obtained through the city.

The amendment would privatize pension plans so city
employees hired after January 2014 contribute to and manage their own
retirement accounts — a shift from the current set-up in which the city
pools pension funds and manages the investments through an independent
board.

But unlike private-sector employees, city workers might
not qualify for Social Security benefits, which means they would lack
the safety net and benefits that shield them from bad investments.

Alternatively, the city could be required to pay into
Social Security. An Aug. 5 report from the city administration claims
that would make the tea party-backed system more expensive than the
current pension system, which would defeat the reform’s main intention.

Supporters of the tea party amendment say it’s necessary
because Cincinnati is dragging its feet in addressing an $862 million
pension liability, which earned the city a downgraded bond rating
from Moody’s in a July 15 report. Although the city passed reforms in
2011 addressing future pension costs, the unfunded liability actually
grew by $134 million between 2012 and 2013.

The Cincinnati Retirement System board is working on
changes that would address the unfunded liability, but so far no
agreement has been reached as board members argue over whether taxpayers
or retirees should be hit hardest by more cost-cutting measures.

City officials acknowledge the issues with the current
pension system, but they claim the tea party-backed amendment would
exacerbate cost problems and reduce payments to future city retirees.

“Under the guise of ‘reform,’ a well-financed out-of-state
group is pushing an amendment that spells economic disaster for the
future city retirees and the city’s budget,” Vice Mayor Roxanne Qualls
said in a statement. “Current and future retirees need an income they
can live on. This amendment is a budget-buster for retirees and the
city.”

City Council condemned the amendment in a resolution unanimously passed on Aug. 7.

CityBeat’s Aug. 14 news story will give an in-depth look at the amendment and the campaign behind it.

It might cost Cincinnati more to issue debt following a credit rating downgrade by Moody’s. In a report released on July 15, the credit ratings agency downgraded the city’s general bonds from Aa1 to Aa2 and revised the bonds’ outlook to “negative.”

“The negative outlook reflects the expectation that the city will continue to face challenges in attaining structurally balanced operations, stemming from its unfunded pension liabilities and reliance on a number of one-time budgetary solutions in recent years,” the report reads.

In a memo to the mayor and City Council, City Manager Milton Dohoney put the blame on Moody’s methodological changes that now account for state pension funds that Cincinnati has no direct control over. Specifically, Moody’s now looks at the state-managed Ohio Public Employees Retirement System (OPERS) and Ohio Police and Fire Retirement System (OP&F) when scoring Cincinnati, instead of just the Cincinnati Retirement System (CRS), which the city directly operates.

“It is important to note the Ohio Revised Code provides the percentage each employer pays into OPERS and OP&F as its contribution. The City has paid 100 (percent) of this contribution each year as required. The City has no ability to impact the unfunded liability of OPERS or OP&F,” Dohoney wrote in the memo.

Still, some of the blame lies on the city’s pension fund, which is lacking a long-term strategy for sustainability, according to Moody’s.

The CRS board is currently looking at scenarios to address the city’s long-term liabilities. Its next meeting is on Aug. 1, and it could produce changes that would be presented to City Council, according to the city manager’s memo.

The report also takes issue with the city’s repeated use of one-time sources to fix budget gaps. Since 2001, the city’s annual operating budgets have used one-time sources instead of achieving structural balance with long-term cuts and sources of revenue.

Critics argue the one-time sources only delay fiscal woes instead of permanently fixing the budget shortfalls. Supporters claim the one-time methods allow the city to balance its budget without taking austere measures that would lead to city layoffs and hurt growth while the economy is in recovery.

Moody’s also claims the city has relatively weak socioeconomic indicators, particularly resident income levels and historical unemployment rates.

The report from Moody’s does give Cincinnati some good credit, citing a “pressured but still satisfactory financial position,” the recent stabilization of earnings taxes, financial flexibility provided by an available but untapped levy authority, the city’s economically diverse population and an above-average debt position.

Bonds are typically issued when the city needs a temporary infusion of funds for capital projects, such as the Cincinnati streetcar.

Revisions will reduce city layoffs, make cuts to outside agencies

Mayor Mark Mallory announced revisions to the city manager’s budget plan
today that will reduce the amount of layoffs by making several
additional cuts, particularly in funding that goes to outside agencies,
and using recently discovered revenue.

Mallory’s changes will restore 18 firefighter positions,
17 police positions, three inspector positions at the Health Department
and two positions at the Law Department, reducing the total layoffs to 161, with 49 of those being police positions and 53 being firefighter positions.

To balance out the restored positions, the mayor is suggesting closing down two more recreation centers: Westwood Town Hall
Recreation Center and Mt. Auburn Recreation Center. He is also suggesting cuts to the
mayor’s office budget ($32,000) and outside agencies ($1.3 million),
including the Cincinnati Center City Development Corporation (3CDC), the
Greater Cincinnati Port Authority, the Center for Closing the Health Gap,
the Cincinnati USA Regional Chamber of Commerce and the African American Chamber
of Commerce.

Mallory’s revised budget plan also makes use of about
$500,000 in revenue that was not located in time for City Manager Milton
Dohoney’s budget proposal.

Mallory justified the cuts by saying public safety must
come first, but he says he would keep the funding under better circumstances.

“The progress we have seen in our city cannot stand on its own without an emphasis on public safety,” he said.

The budget will have to be enacted by June 1 to give the
city 30 days to implement the changes before fiscal year 2014, which
begins July 1. It will now move to City Council, which will be able to make its own changes.

Mallory stressed that the city’s $35 million operating budget deficit
is being driven by a few outside factors, including reduced state
funding, court challenges holding up the parking plan and the recent
economic downturn.

Gov. John Kasich has cut local government funding by about half in his state budget plans, which Dohoney estimated cost
Cincinnati about $22.2 million in 2013 (“Enemy of the State,” issue of March 20).

The city was planning to make up for some of that lost
funding by leasing its parking assets to the Port Authority and using
the funds to help balance the deficit and fund development projects
around the city, including a downtown grocery store (“Parking Stimulus,”
issue of Feb. 27). But opponents of the plan, who say they are cautious
of parking rate hikes and extended parking meter hours, have
successfully held up the plan in court and through a referendum effort.

Cincinnati’s population has steadily decreased since the
1950s, which means the city has been taking in less tax revenue from a
shrinking population. That was exacerbated by the Great Recession, which
further lowered tax revenue as people lost their jobs and cut back
spending.

Still, the city has run structurally imbalanced budget
since 2001, according to previous testimony from Budget Director Lea
Eriksen. The previous budgets were balanced through one-time revenue
sources, but Dohoney told media outlets last week that, barring the
parking plan, those sources have run out.

Budget increases aren’t enough to overcome troubled past

Gov. John Kasich touted a rosy, progressive vision when announcing his education reform plan Jan. 31, but reality does not match the governor’s optimism. It’s true Kasich’s proposed 2014-2015 budget
will not reduce school funding, but under the Kasich administration,
local schools will still have a net loss in state funds.

The governor’s office released tentative budget numbers yesterday that show the Kasich plan will give Cincinnati Public Schools (CPS) $8.8 million more funding for the 2014 fiscal year. But that’s not enough to make up for the $39 million CPS will lose in the same fiscal year due to Kasich’s first budget, which was passed passed in 2011. Even with the new education plan, the net loss in the 2014 fiscal year is $30.2 million.

The problem is Kasich’s first budget had massive cuts for schools. The elimination of the tangible personal
property reimbursements (TPP) hit CPS particularly hard, as CityBeat previously covered (“Battered But Not Broken,”
issue of Oct. 3). In the Cut Hurts Ohio website, Innovation Ohio and Policy Matters Ohio estimated Kasich’s budget cuts resulted in $1.8 billion less funding for
education statewide. In Hamilton County, the cuts led to
$117 million less funding.

Kasich’s massive cuts didn’t even lead to lower taxes for many Ohioans. A report from Innovation Ohio found
school districts and voters made up for the big education cuts with $487 million in new school levies. In 2012, Cincinnati voters approved a $51.5 million levy for CPS. The school levies are a direct
increase on local income and property taxes, but they’re measures
Ohioans clearly felt they had to take in the face of big state
budget cuts.

For more analysis of Kasich’s budget, check out CityBeat’s other coverage:

But state budget plans forgo Medicaid expansion

A new poll from the Health Foundation of Greater Cincinnati found a clear majority of Ohioans supports the Medicaid expansion.

The poll asked a random sample of 866 Ohioans, "Generally speaking, do you favor or oppose expanding Medicaid to provide health insurance to more low-income uninsured adults?" About 63 percent of respondents said they favor an expansion, with a margin of error of 3.3 percent.

The poll found a partisan divide on the issue: About 82 percent of Democrats support the expansion, while 55 percent of Republicans oppose it.

The question was part of the Ohio Health Issues Poll conducted between May 19 and June 2. The University of Cincinnati's Institute for Policy Research has conducted the poll for the Health Foundation each year since 2005.

"The Health Foundation supports the expansion of Medicaid in Ohio because we believe that it will have a positive impact on the health of uninsured Ohioans who will be newly covered by Medicaid," said Health Foundation CEO Jim Schwab in a statement. "We also believe that expansion of Medicaid will have a positive impact on Ohio’s economy. This positive impact was validated in an economic impact study that the Foundation helped underwrite earlier this year. The OHIP findings show that the majority of Ohioans also support the expansion."

Under the Affordable Care Act ("Obamacare"), states are asked to expand their Medicaid programs to 138 percent of the federal poverty level, or an annual income of about $15,856 for a single-person household and $32,499 for a family of four.

For the first three years, the federal government would pay for the entire expansion. Following that, the federal government would phase down its support for the expansion to 90 percent of the costs, where it would indefinitely remain.

Earlier this year, the Health Policy Institute of Ohio released an analysis that found the Medicaid expansion would insure nearly half a million Ohioans and save the state about $1.8 billion in the next decade.

Although Gov. John Kasich supports the expansion, his Republican colleagues, who control the Ohio House and Senate, have so far passed on the expansion in budget plans and legislation.

In an April interview with CityBeat, Michael Dittoe, spokesperson for Ohio House Republicans, said the proposed federal commitment to the Medicaid expansion is unprecedented, which, according to Dittoe, makes Republican legislators skeptical that the federal government can live up to such obligations in the long term.

Bipartisan legislation introduced this week in the Ohio House and Senate would reform the Medicaid program — supposedly in a way that lowers costs without cutting services. But the legislation wouldn't take up the Medicaid expansion.